IDEAS home Printed from https://ideas.repec.org/p/tin/wpaper/20000101.html
   My bibliography  Save this paper

Traffic Congestion and Congestion Pricing

Author

Listed:
  • C. Robin Lindsey

    (University of Alberta)

  • Erik T. Verhoef

    (Vrije Universiteit Amsterdam)

Abstract

For several decades growth of traffic volumes has outstrippedinvestments inroad infrastructure. The result has been a relentless increase intrafficcongestion. This paper reviews the economic principles behindcongestionpricing in static and dynamic settings, which derive from thebenefits ofcharging travellers for the externalities they create. Specialattention ispaid to various complications that make simple textbook congestionpricingmodels of limited relevance, and dictate that congestion pricingschemes bestudied from the perspective of the theory of the second best. Thesecomplications include pricing in networks, heterogeneity of users,stochasticcongestion, interactions of the transport sector with the rest of theeconomy,and tolling on private roads. Also the implications of congestionpricing foroptimal road capacity are considered, and finally some explanationsfor thelongstanding social and political resistance to road pricing areoffered.

Suggested Citation

  • C. Robin Lindsey & Erik T. Verhoef, 2000. "Traffic Congestion and Congestion Pricing," Tinbergen Institute Discussion Papers 00-101/3, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20000101
    as

    Download full text from publisher

    File URL: https://papers.tinbergen.nl/00101.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Verhoef, Erik T. & Rouwendal, Jan & Rietveld, Piet, 1999. "Congestion Caused by Speed Differences," Journal of Urban Economics, Elsevier, vol. 45(3), pages 533-556, May.
    2. Mills, David E, 1981. "Ownership Arrangements and Congestion-Prone Facilities," American Economic Review, American Economic Association, vol. 71(3), pages 493-502, June.
    3. AndrÊ de Palma & Robin Lindsey, 2000. "Private toll roads: Competition under various ownership regimes," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 34(1), pages 13-35.
    4. Braid, Ralph M., 1996. "Peak-Load Pricing of a Transportation Route with an Unpriced Substitute," Journal of Urban Economics, Elsevier, vol. 40(2), pages 179-197, September.
    5. MARCHAND, Maurice, 1968. "A note on optimal tolls in an imperfect environment," LIDAM Reprints CORE 22, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Richard H. M. Emmerink, 1998. "Information and Pricing in Road Transportation," Advances in Spatial Science, Springer, number 978-3-642-72143-4, Fall.
    7. Bovenberg, A Lans & Goulder, Lawrence H, 1996. "Optimal Environmental Taxation in the Presence of Other Taxes: General-Equilibrium Analyses," American Economic Review, American Economic Association, vol. 86(4), pages 985-1000, September.
    8. Chu, Xuehao, 1999. "Alternative congestion pricing schedules," Regional Science and Urban Economics, Elsevier, vol. 29(6), pages 697-722, November.
    9. Verhoef, Erik T., 2002. "Second-best congestion pricing in general static transportation networks with elastic demands," Regional Science and Urban Economics, Elsevier, vol. 32(3), pages 281-310, May.
    10. Arnott, Richard & Kraus, Marvin, 1998. "When are anonymous congestion charges consistent with marginal cost pricing?," Journal of Public Economics, Elsevier, vol. 67(1), pages 45-64, January.
    11. Laih, Chen-Hsiu, 1994. "Queueing at a bottleneck with single- and multi-step tolls," Transportation Research Part A: Policy and Practice, Elsevier, vol. 28(3), pages 197-208, May.
    12. Bovenberg, A.L. & Goulder, L.H., 1996. "Optimal environmental taxation in the presence of other taxes : General equilibrium analyses," Other publications TiSEM 5d4b7517-c5c8-4ef6-ab76-3, Tilburg University, School of Economics and Management.
    13. Carlos F. Daganzo & Reinaldo C. Garcia, 2000. "A Pareto Improving Strategy for the Time-Dependent Morning Commute Problem," Transportation Science, INFORMS, vol. 34(3), pages 303-311, August.
    14. Verhoef, E.T. & Small, K.A., 1999. "Product Differentiation on Roads Second-Best Congestion Pricing with Heterogeneity under Public and Private Ownership," Papers 99-00-01, California Irvine - School of Social Sciences.
    15. Vernon Henderson, J., 1992. "Peak shifting and cost-benefit miscalculations," Regional Science and Urban Economics, Elsevier, vol. 22(1), pages 103-121, March.
    16. Edelson, Noel M, 1971. "Congestion Tolls Under Monopoly," American Economic Review, American Economic Association, vol. 61(5), pages 873-882, December.
    17. Liu, Louie Nan & McDonald, John F., 1998. "Efficient Congestion Tolls in the Presence of Unpriced Congestion: A Peak and Off-Peak Simulation Model," Journal of Urban Economics, Elsevier, vol. 44(3), pages 352-366, November.
    18. De Vany, Arthur S, 1976. "Uncertainty, Waiting Time, and Capacity Utilization: A Stochastic Theory of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 84(3), pages 523-541, June.
    19. Hai Yang, 1999. "Evaluating the benefits of a combined route guidance and road pricing system in a traffic network with recurrent congestion," Transportation, Springer, vol. 26(3), pages 299-322, August.
    20. Verhoef, Erik & Nijkamp, Peter & Rietveld, Piet, 1996. "Second-Best Congestion Pricing: The Case of an Untolled Alternative," Journal of Urban Economics, Elsevier, vol. 40(3), pages 279-302, November.
    21. Yang, Hai & Huang, Hai-Jun, 1998. "Principle of marginal-cost pricing: how does it work in a general road network?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(1), pages 45-54, January.
    22. Mayeres, Inge & Proost, Stef, 2001. "Marginal tax reform, externalities and income distribution," Journal of Public Economics, Elsevier, vol. 79(2), pages 343-363, February.
    23. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1993. "A Structural Model of Peak-Period Congestion: A Traffic Bottleneck with Elastic Demand," American Economic Review, American Economic Association, vol. 83(1), pages 161-179, March.
    24. Carlos F. Daganzo & Yosef Sheffi, 1977. "On Stochastic Models of Traffic Assignment," Transportation Science, INFORMS, vol. 11(3), pages 253-274, August.
    25. Chander, Parkash & Leruth, Luc, 1989. "The optimal product mix for a monopolist in the presence of congestion effects : A model and some results," International Journal of Industrial Organization, Elsevier, vol. 7(4), pages 437-449, December.
    26. Malachy Carey & Ashok Srinivasan, 1993. "Externalities, Average and Marginal Costs, and Tolls on Congested Networks with Time-Varying Flows," Operations Research, INFORMS, vol. 41(1), pages 217-231, February.
    27. Small, Kenneth A., 1992. "Using the Revenues from Congestion Pricing," University of California Transportation Center, Working Papers qt32p9m3mm, University of California Transportation Center.
    28. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1992. "Route choice with heterogeneous drivers and group-specific congestion costs," Regional Science and Urban Economics, Elsevier, vol. 22(1), pages 71-102, March.
    29. May, A. D. & Milne, D. S., 2000. "Effects of alternative road pricing systems on network performance," Transportation Research Part A: Policy and Practice, Elsevier, vol. 34(6), pages 407-436, August.
    30. William Vickrey, 1971. "Responsive Pricing of Public Utility Services," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 337-346, Spring.
    31. Yang, Hai & Hai-Jun, Huang, 1997. "Analysis of the time-varying pricing of a bottleneck with elastic demand using optimal control theory," Transportation Research Part B: Methodological, Elsevier, vol. 31(6), pages 425-440, November.
    32. Kenneth Button & Erik Verhoef (ed.), 1998. "Road Pricing, Traffic Congestion and the Environment," Books, Edward Elgar Publishing, number 940.
    33. Robin Lindsey & Andre de Palma, 1998. "Information and Usage of Congestible Facilities Under Different Pricing Regimes," Canadian Journal of Economics, Canadian Economics Association, vol. 31(3), pages 666-692, August.
    34. Daganzo, Carlos F., 1995. "A pareto optimum congestion reduction scheme," Transportation Research Part B: Methodological, Elsevier, vol. 29(2), pages 139-154, April.
    35. Richard Arnott & An Yan, 2000. "The Two-Mode Problem: Second-Best Pricing and Capacity," Boston College Working Papers in Economics 474, Boston College Department of Economics.
    36. Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-260, May.
    37. F. H. Knight, 1924. "Some Fallacies in the Interpretation of Social Cost," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 38(4), pages 582-606.
    38. Stella C. Dafermos, 1973. "Toll Patterns for Multiclass-User Transportation Networks," Transportation Science, INFORMS, vol. 7(3), pages 211-223, August.
    39. Verhoef, Erik T. & Emmerink, Richard H. M. & Nijkamp, Peter & Rietveld, Piet, 1996. "Information provision, flat and fine congestion tolling and the efficiency of road usage," Regional Science and Urban Economics, Elsevier, vol. 26(5), pages 505-529, August.
    40. Nijkamp, Peter & Rienstra, Sytze A, 1995. "Private Sector Involvement in Financing and Operating Transport Infrastructure," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 29(2), pages 221-235, May.
    41. Tabuchi Takatoshi, 1993. "Bottleneck Congestion and Modal Split," Journal of Urban Economics, Elsevier, vol. 34(3), pages 414-431, November.
    42. Small, Kenneth A. & Gomez-Ilbanez, Jose A., 1998. "Road Pricing for Congestion Management: The Transition from Theory to Policy," University of California Transportation Center, Working Papers qt8kk909p1, University of California Transportation Center.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Börjesson, Maria & Brundell-Freij, Karin & Eliasson, Jonas, 2014. "Not invented here: Transferability of congestion charges effects," Transport Policy, Elsevier, vol. 36(C), pages 263-271.
    2. Pascal Courty & Mario Pagliero, 2011. "Does responsive pricing smooth demand shocks?," Applied Economics, Taylor & Francis Journals, vol. 43(30), pages 4707-4721.
    3. Julie Bulteau & Thierry Feuillet & Sophie Dantan & Souhir Abbes, 2023. "Encouraging carpooling for commuting in the Paris area (France): which incentives and for whom?," Transportation, Springer, vol. 50(1), pages 43-62, February.
    4. Brendan Badia & Randall Berry & Ermin Wei, 2019. "Investment in EV charging spots for parking," Papers 1904.09967, arXiv.org.
    5. Li, Sen & Yang, Hai & Poolla, Kameshwar & Varaiya, Pravin, 2021. "Spatial pricing in ride-sourcing markets under a congestion charge," Transportation Research Part B: Methodological, Elsevier, vol. 152(C), pages 18-45.
    6. Masrono Yugihartiman & B. Budiono & Maman Setiawan & Achmad Kemal Hidayat, 2023. "Estimating Travel Choice Probability of Link-Based Congestion Charging Scheme for Car Commuter Trips in Jakarta," Sustainability, MDPI, vol. 15(10), pages 1-17, May.
    7. Beheshtian, Arash & Richard Geddes, R. & Rouhani, Omid M. & Kockelman, Kara M. & Ockenfels, Axel & Cramton, Peter & Do, Wooseok, 2020. "Bringing the efficiency of electricity market mechanisms to multimodal mobility across congested transportation systems," Transportation Research Part A: Policy and Practice, Elsevier, vol. 131(C), pages 58-69.
    8. Adnan, Muhammad & Nahmias Biran, Bat-hen & Baburajan, Vishnu & Basak, Kakali & Ben-Akiva, Moshe, 2020. "Examining impacts of time-based pricing strategies in public transportation: A study of Singapore," Transportation Research Part A: Policy and Practice, Elsevier, vol. 140(C), pages 127-141.
    9. Ronnie Schöb, 2005. "Not optimal, but Effective: the Multi-Mode Ticket for Reducing Urban Traffic Congestion in Medium-Sized Towns," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 3(3), pages 28-33, November.
    10. Farokhi, Farhad & Johansson, Karl H., 2015. "A piecewise-constant congestion taxing policy for repeated routing games," Transportation Research Part B: Methodological, Elsevier, vol. 78(C), pages 123-143.
    11. Gibson, Matthew & Carnovale, Maria, 2015. "The effects of road pricing on driver behavior and air pollution," Journal of Urban Economics, Elsevier, vol. 89(C), pages 62-73.
    12. Levinson, David, 2005. "Micro-foundations of congestion and pricing: A game theory perspective," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 691-704.
    13. Gonzales, Eric J., 2016. "Demand responsive transit systems with time-dependent demand: User equilibrium, system optimum, and management strategyAuthor-Name: Amirgholy, Mahyar," Transportation Research Part B: Methodological, Elsevier, vol. 92(PB), pages 234-252.
    14. Patel Nilanchal & Mukherjee Alok Bhushan, 2015. "Assessment of network traffic congestion through Traffic Congestability Value (TCV): a new index," Bulletin of Geography. Socio-economic Series, Sciendo, vol. 30(30), pages 123-134, December.
    15. Nilanchal PATEL & Alok Bhushan MUKHERJEE, 2014. "Categorization Of Urban Traffic Congestion Based On The Fuzzification Of Congestion Index Value And Influencing Parameters," Theoretical and Empirical Researches in Urban Management, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 9(4), pages 36-51, November.
    16. repec:ces:ifodic:v:3:y:2005:i:3:p:14567614 is not listed on IDEAS
    17. Mohammed Ziaul Haider & Rabeya Sultana Papri, 2021. "Cost of traffic congestion in Dhaka Metropolitan City," Public Transport, Springer, vol. 13(2), pages 287-299, June.
    18. Ronnie Schöb, 2005. "Not optimal, but Effective: the Multi-Mode Ticket for Reducing Urban Traffic Congestion in Medium-Sized Towns," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 3(03), pages 28-33, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Button, Kenneth, 2004. "1. The Rationale For Road Pricing: Standard Theory And Latest Advances," Research in Transportation Economics, Elsevier, vol. 9(1), pages 3-25, January.
    2. de Palma, André & Kilani, Moez & Lindsey, Robin, 2005. "Congestion pricing on a road network: A study using the dynamic equilibrium simulator METROPOLIS," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 588-611.
    3. Erik T. Verhoef, 2000. "Second-Best Congestion Pricing in General Networks - Algorithms for Finding Second-Best Optimal Toll Levels and Toll Points," Tinbergen Institute Discussion Papers 00-084/3, Tinbergen Institute.
    4. Erik T. Verhoef & Kenneth A. Small, 1999. "Product Differentiation on Roads: Second-Best Congestion Pricing with Heterogeneity under Public and Private Ownership," Tinbergen Institute Discussion Papers 99-066/3, Tinbergen Institute.
    5. Verhoef, Erik T., 2002. "Second-best congestion pricing in general networks. Heuristic algorithms for finding second-best optimal toll levels and toll points," Transportation Research Part B: Methodological, Elsevier, vol. 36(8), pages 707-729, September.
    6. Verhoef, Erik T., 2002. "Second-best congestion pricing in general static transportation networks with elastic demands," Regional Science and Urban Economics, Elsevier, vol. 32(3), pages 281-310, May.
    7. Verhoef, Erik Teodoor, 2000. "The Generalized Second-Best Network Congestion Pricing Problem," ERSA conference papers ersa00p336, European Regional Science Association.
    8. Nie, Yu (Marco) & Yin, Yafeng, 2013. "Managing rush hour travel choices with tradable credit scheme," Transportation Research Part B: Methodological, Elsevier, vol. 50(C), pages 1-19.
    9. Verhoef, Erik T. & Koh, Andrew & Shepherd, Simon, 2010. "Pricing, capacity and long-run cost functions for first-best and second-best network problems," Transportation Research Part B: Methodological, Elsevier, vol. 44(7), pages 870-885, August.
    10. Georgina Santos & Erik Verhoef, 2011. "Road Congestion Pricing," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 23, Edward Elgar Publishing.
    11. Li, Zhi-Chun & Huang, Hai-Jun & Yang, Hai, 2020. "Fifty years of the bottleneck model: A bibliometric review and future research directions," Transportation Research Part B: Methodological, Elsevier, vol. 139(C), pages 311-342.
    12. Button, Kenneth, 2020. "The Transition From Pigou’S Ideas On Road Pricing To Their Application," Journal of the History of Economic Thought, Cambridge University Press, vol. 42(3), pages 417-438, September.
    13. C. Robin Lindsey & Erik T. Verhoef, 1999. "Congestion Modelling," Tinbergen Institute Discussion Papers 99-091/3, Tinbergen Institute.
    14. Robin Lindsey, 2006. "Do Economists Reach A Conclusion on Road Pricing? The Intellectual History of an Idea," Econ Journal Watch, Econ Journal Watch, vol. 3(2), pages 292-379, May.
    15. Rouwendal, Jan & Verhoef, Erik T., 2004. "2. Second-Best Pricing For Imperfect Substitutes In Urban Networks," Research in Transportation Economics, Elsevier, vol. 9(1), pages 27-60, January.
    16. Verhoef, Erik T., 1999. "Time, speeds, flows and densities in static models of road traffic congestion and congestion pricing," Regional Science and Urban Economics, Elsevier, vol. 29(3), pages 341-369, May.
    17. Small, Kenneth A. & Yan, Jia, 2001. "The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation," Journal of Urban Economics, Elsevier, vol. 49(2), pages 310-336, March.
    18. Lindsey, Robin, 2012. "Road pricing and investment," Economics of Transportation, Elsevier, vol. 1(1), pages 49-63.
    19. de Palma, Andre & Lindsey, Robin, 2002. "Private roads, competition, and incentives to adopt time-based congestion tolling," Journal of Urban Economics, Elsevier, vol. 52(2), pages 217-241, September.
    20. Kockelman, Kara M. & Lemp, Jason D., 2011. "Anticipating new-highway impacts: Opportunities for welfare analysis and credit-based congestion pricing," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(8), pages 825-838, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tin:wpaper:20000101. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tinbergen Office +31 (0)10-4088900 (email available below). General contact details of provider: https://edirc.repec.org/data/tinbenl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.